Connecticut’s Day of Financial Reckoning Just Around the Corner
Update: New London Day-
Rell plan would cut budget by $337M: Governor's targets include aid to towns, programs for poor
Over the summer hardly a day went by without headlines of the financial disaster that had been created by over-spending in California – over regulating and over taxation didn’t help matters as it drove away a good part of the tax base. They had managed to work themselves into a Twenty-five Billion dollar budget deficit and even had to go so far as to pay creditors with IOU’s when the governor and state legislature were unable to come to an agreement on how to resolve the revenue shortfall. Keep in mind, California has a population of a little over 35 million people.
As the fiscal crisis in California was unfolding, Connecticut was facing its own version, albeit in an earlier development stage. It took until the very end of August for the state legislature come up with a two year budget that the governor wouldn’t veto. And, even then it took draining the rainy day fund and considerable borrowing to “balance” the books. Since then we have heard repeatedly that revenues are coming up short and that further cuts will have to be made to “balance” the current year’s budget. Shortfall predictions vary from $300+ Million to $600+ Million dollars – and it’s only been two and half months. But this is only the tip of the iceberg.
A couple of days ago someone sent me an article on the pending fiscal crisis awaiting the state of Connecticut. Attached was a report by the Connecticut General Assembly Office of Fiscal Analysis (OFA) which you will find -HERE-.
What this report points out is that not only are we facing a shortfall in the 2010 and 2011 budgets, but come 2012 these hundreds of million dollar short falls will balloon to a whopping $3.2+ BILLION! With Connecticut’s population at ~3.5 million that’s a 28% greater budget deficit, on a per capita basis, than the California deficit that garnered so much attention last summer. But we just keep on spending………
What’s Connecticut to do? Well, on page 11 the OFA points out that either spending has to be cut some 18+% or revenues (read taxes) must increase by more than 20% OVER the projected growth of 5.8% already built in, or a lot of both. What are the major spending items? See page 12 – the top four are: Medicaid, Personal Services, Education Equalization Grants, and Debt Service. Together they account for over 61% of total expenses. Medicaid and Debt Service cuts? I don’t think so. If anything they are going in the other direction. That requires cuts of 27% in everything else or the 20% plus increase in taxes. Sooner or later, one way or the other, it’s going to come back down to the municipalities. But we just keep on spending……..
Dave
Good to see someone finally raising the truth about this. Based on the shortfalls in the indiv. income tax, sales tax and corporate tax I expect the 2009-10 budget to be over one billion under water and growing.
Great article Dave. I'm afraid that many people live in a fantasy world where we can just continue to tax, borrow, spend our way to prosperity. What's even more amazing is that despite the economic wall we hit in the last year, some people STILL have not woken up to the stark financial realities we face.
Not sure what the answer is. The Kenyesians are still calling for more stimulus spending to get us out the persistent slump (particularly in unemployment) so perhaps municipaliites will see more "Obama Money" next year.
However, the deficits that are being created are becoming political issues for the White House and the Obama administration is starting to use rhetoric such as "cutting spending" and "pounding down the deficits". So if the future does not hold for us another federal bailout, Ct. and its munipalities will finally have to bear the unfavorable consequences of their actions.
From today’s Norwich Bulletin, Headline - November 25th, “Rell calls for 3% cut in aid to towns” as part of a plan to reduce the current year’s deficit by some $470 million. With the state comptroller predicting a shortfall of more than $600 million, you can expect this is only the start – never mind the $3.2+ Billion coming up in 2012. But hey, we’ll worry about next year next year, right?
What’s this mean to Woodstock? Right now looks like about $200,000 – from this year’s budget. The hole will only get deeper.
Dave
Dave, Last night the rocket scientists on the BOF adopted a new strategy to shut you up- limiting comments to 5 minutes per topic. Since you are usally the only one who speaks up, it smells pretty bad and shows the lack of transparency we continue to suffer at the hands of these people. I for one will be happy to stand up and yield my time to you- keep taking it to them before we are completely fleeced. Thanks.